This paper compares a strict
inflation target regime and a conservative central bank regime in order to
determine the monetary regime appropriate for a disinflation process. The analysis shows
that in a two-period model, in which policymakers face given first period
inflationary expectations, a strict inflation target could be preferred to the
appointment of a conservative central banker who acts in a discretionary manner.
The result differs from that of Roggof (1985), who assumed rational
expectations and concluded that a conservative central banker is always
preferred. The disadvantage of the conservative central banker derived from its
tendency to accelerate the disinflation
process compared to the desired
rate from the social welfare point of view.
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